CIRCULATION OF PRIVATE NOTES DURING A CURRENCY SHORTAGE*

Xavier Cuadras‐morató
Authors registered in the RePEc Author Service: Xavier Cuadras-Morató

Manchester School, 2009, vol. 77, issue 4, 461-478

Abstract: In this paper we present a version of the search theoretical model of money that captures two phenomena that have characterized several episodes of monetary history: currency shortages and the circulation of privately issued notes. As usual in these models, the media of exchange are determined as part of the equilibrium. We characterize all the different equilibria and specify the conditions under which there is a currency shortage and/or privately issued notes are used as means of payment. There always exists an equilibrium in which notes circulate, either alone or together with coins and, hence, credit is a self‐fulfilling phenomenon.

Date: 2009
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Citations: View citations in EconPapers (2)

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https://doi.org/10.1111/j.1467-9957.2009.02104.x

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Working Paper: Circulation of Private Notes during a Currency Shortage (2015)
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